Why Do Short Sellers Like Qualitative News?

59 Pages Posted: 6 Nov 2015

See all articles by Bastian von Beschwitz

Bastian von Beschwitz

Board of Governors of the Federal Reserve System

Oleg Chuprinin

UNSW; Financial Research Network (FIRN)

Massimo Massa

INSEAD - Finance

Date Written: 2015-11-05

Abstract

Short sellers trade more on days with qualitative news -- i.e. news containing fewer numbers. We show that this behavior is not informationally motivated but can be explained by short sellers exploiting higher liquidity on such days. We document that liquidity and noise trading increase in the presence of qualitative news thus enabling short sellers to better disguise their informed trades. Natural experiments support our findings. For example, qualitative news has a bigger effect on short sellers' trading after a decrease in liquidity following a stock's deletion from S&P 500 and a lower effect when investor attention is distracted by the Olympic Games.

Suggested Citation

von Beschwitz, Bastian and Chuprinin, Oleg and Massa, Massimo, Why Do Short Sellers Like Qualitative News? (2015-11-05). FRB International Finance Discussion Paper No. 1149. Available at SSRN: https://ssrn.com/abstract=2686985 or http://dx.doi.org/10.17016/IFDP.2015.1149

Bastian Von Beschwitz (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Oleg Chuprinin

UNSW ( email )

Room 349, UNSW Business School
High St
UNSW Sydney, NSW 2052
Australia
406674419 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

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